Why Universal Display Stock Popped Today

What happened

Shares of Universal Display Corporation (NASDAQ: OLED) jumped as much as 14.8% early Wednesday, then settled to trade up 9% as of 2:00 p.m. EST, after the OLED technologist signed new long-term license and material supply agreements with its largest customer, Samsung Display (SDC).

Universal Display and SDC signed new agreements that are scheduled to run through Dec. 31, 2022, with the option of being extended for an additional two-year period.

So what

This news is particularly significant considering Universal Display's previous agreements with Samsung Display -- which were initially signed in late 2011 -- technically expired at the end of 2017. And though Universal Display did inform investors early last month that it was engaged in discussions regarding a formal long-term extension, the temporary delay inevitably fostered worries over the long-held bearish argument that Samsung may attempt to move forward without signing a new deal.

Now what

Financial terms weren't disclosed, so it's unclear exactly when and how much Samsung Display will contribute to Universal Display's top and bottom lines going forward. But it's also worth noting that the agreements have the same expiration as Universal Display's similar deal with LG Display (its second-largest customer), signed in early 2015, through which we now know that LG Display pays running royalties on licensed products with a one-quarter lag in revenue recognition.

In any case, it's clear that Samsung Display has no intention of ditching Universal Display or its flagship OLED technology. And with the growth of OLED-centric devices still in its early stages, Universal Display investors have every right to celebrate this news.

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Steve Symington owns shares of Universal Display. The Motley Fool owns shares of and recommends Universal Display. The Motley Fool has a disclosure policy.